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Series 7 Formulas > Options > Flashcards

Options Flashcards

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Series 7 Top-off Exam flashcards
1
Q

Long Call

A
  • Speculative Strategy
  • Right to Buy
  • Bullish

Breakeven= Strike Price + Premium
Max Gain= Unlimited
Max Loss= Premium

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2
Q

Short Call

A
  • Speculative Strategy
  • AKA Short Naked Call
  • Obligation to Sell
  • Bearish

Breakeven= Strike Price + Premium
Max Gain= Premium
Max Loss= Unlimited

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3
Q

Long Put

A
  • Speculative Strategy
  • Right to Sell
  • Bearish

Breakeven= Strike - Premium
Max Gain= Breakeven= Strike - Premium
Max Loss= Premium

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4
Q

Short Put

A
  • Speculative Strategy
  • AKA Short Naked Put
  • Obligation to Buy
  • Bullish

Breakeven= Strike - Premium
Max Gain= Premium
Max Loss= Breakeven= Strike - Premium

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5
Q

Short Stock/Long Call

A
  • Hedging (Protect) Strategy
  • Bearish
  • Long call stops upside loss on short stock. Protects stock in rising market.

Breakeven= Market + Premium
Max Gain= Market - Premium
Max Loss= Strike - Market + Premium

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6
Q

Long Stock/Long Put

A
  • Hedging (Protect) Strategy
  • Bullish
  • Long put stops downside loss on long stock. Protects stock in falling market.

Breakeven= Market + Premium
Max Gain= Unlimited
Max Loss= Market - Strike + Premium

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7
Q

Long Stock/Short Call

A
  • Covered Call
  • Income (Cover) Strategy
  • Bullish/Neutral
  • Write calls against long stock for income. Income strategy in a flat market; Income strategy in a rising market if out the money contracts are sold. Unlimited Upside Risk

Breakeven= Market - Premium
Max Gain= Strike - Market + Premium
Max Loss= Market - Premium
*Occurs if the market price of the stock falls to zero

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8
Q

Short Stock/Short Put

A
  • Covered Put
  • Income (Cover) Strategy
  • Bearish/Neutral
  • Write puts against short stock for income; Increasing risk as market falls

Breakeven= Market + Premium
Max Gain= Market - Strike + Premium
Max Loss= Unlimited
*Occurs if the market price of the stock rises

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9
Q

Expiration Cycle

A

Cycle 1: Jan Apr Jul Oct
Cycle 2: Feb May Aug Nov
Cycle 3: Mar Jun Sept Dec

  • For each equity security, an option contract can always be issued for the current trading month (“spot”) and for the “next month.” For example, if it is now May 1, contracts can be issued for May (“spot”) and June (“next month”)
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Series 7 Formulas (6 decks)

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